commercial banks continue to be among the safest, soundest and most
profitable banks in the entire United States according to a study of the
Dec. 31, 1991, Call Reports filed by all 228 Michigan banks with federal
bank regulators. The study was compiled by the Michigan Bankers
Association from copies of the reports furnished by each bank in advance
of their release to the public later this year by federal authorities.

Michigan's banks earned $993.7 million in 1991. This was a 1.01-percent return on total year-end assets of $98.8 billion. The banking industry's "standard of excellence" is a 1-percent return on assets.
The aggregate primary capital of Michigan's banks at the end of 1991 was almost $7.7 billion or 7.78 percent of total assets. Primary capital consists of shareholders' equity plus loan loss reserves. Normally, bank regulators consider a primary capital ratio of 6 percent to be adequate for most banks.
Loan quality at Michigan banks is also excellent. Only 1.64 percent of the loans outstanding at these institutions are non-performing. A non-performing loan is one that is more than 90 days past due or on which the bank is not accruing interest. If less than 2 percent of a bank's loans are non-performing, its loan portfolio is considered to be of very good quality and any ratio less than 4 percent is considered satisfactory.
David Ondersma, president of the bankers association and chairman, president and chief executive officer of First Michigan Bank Corporation in Holland, commented, "The banks of Michigan are in splendid condition. Their earnings are excellent. Their capital positions are, almost without exception, significantly larger than required by the banking authorities. And their loan portfolios are generally free of problems. Quite frankly, I don't believe that it would be possible to improve the situation here in Michigan in any meaningful way."
Ondersma went on to say, "Comparative data from other states will not be available to us for another six to eight weeks. But we doubt that the banks in any other state, large or small, are doing better than our banks here in Michigan. Some might be doing as well, but I doubt that any are doing better."
He also said that he believes that there are three reasons why Michigan banks are doing so well. First, Michigan banking executives are accustomed to dealing with a cyclical economy. Therefore, they do not incur undue risks even when economic conditions are excellent. Second, Michigan did not have a real estate "boom" in the 1980s. As a result, it did not have a "bust" in the 1990s. Finally, the customers of Michigan banks are also familiar with the risks of doing business in a cyclical economy and tend to avoid speculative investments.
Only nine Michigan banks reported a loss for 1991. Of these, five are institutions which have been in business for less than three years and would have been expected to operate at a loss. Of the other four banks reporting a loss, one experienced a large embezzlement and has not yet received an expected recovery which would have eliminated the loss. Another, a subsidiary of a highly profitable holding company, was the victim of a customer fraud which caused it to report a small loss for the year. The remaining two banks appear to have lost money as a result of problem loans.
In a similar study of Dec. 31, 1990, Call Reports conducted one year ago, Michigan banks reported total assets of $93.7 billion, total loans of $59.3 billion, total deposits of $76.8 billion, total primary capital of $7.0 billion and non-performing loans of 1.40 percent of total loans.
All but one of the state's 228 commercial banks are members of the Michigan Bankers Association. With one exception, the deposits in all of the state's banks are insured by the Federal Deposit Insurance Corporation. One bank, River Place Financial Corporation of Detroit, is a limited-service private bank which does not do business with the public and its deposits are not insured.
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/NOTE:
1. Copies of a chart showing key balance sheet figures and performance ratios of all 228 banks are immediately available by fax transmission. For a copy, please call PR Newswire, Southfield, Mich., at 313-352-5200 before 5:30 p.m. today (March 16) or from 8 a.m. to 5:30 p.m. on March 17.
2. Peoples State Bank, Hamtramck, reported a 1991 loss of $1.842 million. Discovery of a major embezzlement at this bank was widely reported during the year. The bank anticipates receiving a $2 million payment from its bonding company and recovering approximately $500,000 from the perpetrator. In addition, it will receive a federal income tax benefit from the loss of about $1 million.
3. Security Bank, Richmond, was the victim of a $2 million fraud perpetrated by one of its customers. No bank employee was involved in this criminal activity. Had it not been for this loss, the bank would have reported after-tax net income for 1991 of $1.2 million instead of a net loss of $41,000.
4. Central Savings Bank, Sault Ste. Marie, reported non-performing loans of 4.01 percent of total loans. Virtually all of the non- performing loans are guaranteed by the Farmers Home Administration, an agency of the U.S. government, and the bank will not suffer a loss on them. The loans are accruing a market rate of interest, the payment of which is guaranteed by the FmHA.
5. The five new banks which reported losses, as expected, for 1991 are: Ann Arbor Commerce Bank; Founders Trust Personal Bank, Grand Rapids; Paragon Bank, Holland; Alliance Banking Company, New Buffalo; and Midwest Guaranty Bank, Troy.
CONTACT: Justin Moran, 313-884-6800, David Ondersma, 616-396-9000, or Donald Booth, 517-485-3600, all of the Michigan Bankers Association/ CO: Michigan Bankers Association ST: Michigan IN: FIN SU: ECO

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